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Review of Dani Wadada Nabudere's 'The Crash of International Finance-Capital and its Implications for the Third World'

Martin Williams

In his review of Dani Nabudere's 'The Crash of International Finance-Capital and its Implications for the Third World', Martin Williams commends the economist's foresight yet laments the absence of stronger analytical engagement.

The fallout of the global financial crisis has created an interesting moment of reflection amongst the many commentators who, until two years ago, placed such faith in markets, capitalism and finance. It has also validated many longtime radicals and skeptics, who have happily taken the opportunity to cry out, 'We told you so!'

Nabudere certainly has some justification for feeling that his earlier analysis foreshadowed some causes of the current crisis, having identified some of the problems arising from debt securitisation, speculation and the rise of the financial economy at the expense of the real economy in the West. These ideas have almost become clichés now among even mainstream economic commentators, but just two years ago – not to mention two decades ago – they would have been viewed as heterodox, even heretical.

But while Nabudere deserves credit for identifying these issues well before most observers, the analysis through which he arrives at these conclusions is much less satisfying. His argument is not stated very precisely and takes many detours, but as I understand it the main thrust is this: labour productivity in industry in the First World started falling in the 1960s, which reduced capitalists’ ability to make 'super-profits' and led to deindustrialisation. This encouraged capitalists to use financial speculation and the creation of new credit instruments to make money without any connection to productive activity, and this divorce of finance from the real economy was bound to lead to a financial crisis.

Nabudere’s arguments in support of this analysis are often questionable, faulty or incomplete, and sometimes even bizarre. For example, it is true enough that industry’s share of employment and GDP (gross domestic product) in most Western nations has been decreasing in the past few decades, but as a matter of empirical fact labour productivity is not falling. Nabudere simply asserts that it is, and only weakly supports it with spotty, anecdotal and sometimes misleading data. Nor is 'capitalists’ failure to generate surplus value from living labour' at fault, as Nabudere inexplicably argues.[1] Whatever problems capitalists might have in the global economy, it seems absurd to argue that making money from labour is one of them.

Two much better reasons for the relative decline of industry in much of the West are competition from poorer nations with lower wages and the overall transition to service- and knowledge-based economies. However, Nabudere is so intent on seeing events through a narrow, doctrinaire Marxist lens that he effectively blinds himself to these explanations. He does not seriously engage with globalisation, which is astounding for a book that claims to be about the global economy. Doing so would present a more complex picture of industrialisation and deindustrialisation than would be apparent from looking at the West alone, which would complicate his story about the growth of the financial sector.

Likewise, Nabudere dismisses the services sector by treating it as essentially unproductive, on par with financial speculation: It 'may be seen as a sign of progress beyond industry, but in reality it represents a stage in the decline and fall of capitalism'.[2] Nabudere does not give any support for this view, and while the implications of the shift from industry to services can and should be seriously debated, it seems inadequate to reject the entire sector out of hand simply because it does not have the same central place in Marxist theory as industry. After all, Nabudere, myself and probably almost everyone reading this article spend our professional lives producing services. Nabudere’s rigid Marxist approach, and the knee-jerk pessimism that so often accompanies Marxist analyses, can be just as inflexible and limited as the market fundamentalism that it seeks to replace.

Most frustrating of all is that, in spite of its title, the book is almost solely focused on events and trends in rich countries, with the Third World playing only a very peripheral role. There is no serious discussion of non-industrialised countries until the final chapter of the 1989 book, and even the 2009 postscript is largely concentrated on events in the US and Europe. When Nabudere does discuss poor countries, he treats them as essentially powerless and passive victims of events in the rich world. Every setback is a conspiracy by global capitalists, and every government policy – whether import substitution in closed economies or liberalisation in open ones – serves only to further tighten global capital’s grip on poor economies.

It was once true that countries in the Third World had little control over their own destinies and that global capital cared deeply about exploiting African peasant farmers, but we should have learned from the last two decades that this frame of analysis is no longer valid. Today’s major global trend is divergence among the countries that made up what used to be called the Third World – divergence between rapidly growing Asian economies and Africa, but also within Africa. And while global capital is still very interested in exploiting Africa’s natural resources, it seems to have lost serious interest in its peasant farmers and unskilled workers. Their relationship to the world economy is now characterised more by disconnection and marginalisation than by the epic struggle between capital and labour that Nabudere still sees.

I am not trying to say that poor countries’ development is completely unconstrained by outside intervention, nor that multinational companies are no longer exploiting them – international injustice still exists, despite the pre-crisis triumphalism of some neoliberal cheerleaders. But it is not analytically or morally correct to pretend that poor countries have no agency, no control over their own destiny. They certainly do not have enough control, and power is inequitably distributed within them. But this is my point: rather than simply decrying our powerlessness in the face of structural injustice, we also need to think critically about how countries can use what space is available and how to ensure that even the poorest and most marginalised have a fair voice in this process.

In the end though, the truly frustrating thing about reading Nabudere’s book is that, despite its many flaws, his conclusions have held up better in light of recent events than have those of most ‘mainstream’ commentators. Nabudere’s book contains some interesting lessons about the world economy, but for thoughtful readers it will hold even more important lessons about the state of critical thinking on the subject and how we can improve it.